Mayor Graham Richard today announced a proposal to establish a fund to meet a fire and police pension shortfall. The plan calls for an ordinance to be created to establish a fund that would set aside financial resources to pay for future pension plan increases.

McCready and Keene, Inc., an independent actuarial consulting firm, will provide an actuarial analysis to suggest a funding mechanism for the City to use to meet the pension shortfall. A final plan from the City is expected by late fall.

The shortfall comes from a public safety pension fund for firefighters and police officers hired before 1977. As a State Senator in the 1970's, Mayor Richard worked to pass legislation that created a fully funded plan for public safety workers hired after 1977. That fund remains self supporting. However, the pension shortfall from the old plan still exists.

The City pays $7.5 million each year to fund the pre-1977 plan, which as of December 31, 2005 had an unfunded liability of $214 million. The State is set to drop its guaranteed 50% cost share of the plan in 2009. The amount the City owes is in excess of two years of property taxes. In addition, a new law prevents cities from raising taxes to pay for pensions.

“The City is committed to financing the pension obligations, but we must set aside a reserve to prepare for future challenges with the anticipated pension shortfall,” said Mayor Richard. “We will continue to be fiscally responsible while still maintaining high levels of service and the best public safety protection possible.”